Goddy Egene writes that the proposed Complaints Management Framework to be adopted in the nation's capital market will assist in restoring investor confidence
About five years ago, Mr. Justus Okoli, bought shares in some companies after friends told him about the benefits of investing in the capital market. After a period of time, he decided to sell some of the shares to meet his financial obligations.
On getting to his stockbroker, he discovered that some of the shares had been sold without his knowledge.
Okoli was frustrated and dejected. He was encouraged by a friend to write a letter of complaint to the regulatory authorities. Six months after writing the letter, he did not get a favourable response.
Because of his inability to find a solution to the problem, Okoli was unable sell the shares and take care of his financial problem. As a result of this experience, he was discouraged from patronsing the stock market and now has a wrong impression about the capital market and operators.
Okoli is not alone in this experience. Many investors have had similar experience of not getting solution to their complaints due to one reason or the other.
The Complaints Management Framework
However, delay in a resolution of complaints by investors in the capital market will soon be a thing of the past as a Compliant Management Framework (CMF) is to be adopted in the market this year.
The CMF, which is market-wide initiative, is being championed by the Securities and Exchange Commission (SEC) under the aegis of the Capital Market Committee (CMC).
Speaking on the CMF, the Chairman of the Association of Stockbroking Houses of Nigeria (ASHON), Mr. Emeka Madubuike, said the primary objective of the initiative is to ensure that participants, especially investors, are reasonably confident that any breaches are promptly dealt within a consistent, firm, fair and honest manner.
He stressed that the need to put the framework in place arose from the fact that the current state of complaints handling clearly falls short of what is required in the Nigerian market especially when compared with other emerging and developing markets.
Current State of Complaint Management System
According to him, today complainants in the market resort to as many as six different places, plagued by delays, partial, selective and non-resolution of complaints, leading to frustration and loss of confidence.
He said: "This results in loss of man hour for regulators as they try to track minor issues and not focusing on the big issues of insider dealing, accounting fraud, Ponzi scheme, among others, and the general lack of development in the market. The proposed harmonised complaint management framework is expected to overcome the ills currently being experienced in the market, and will be broken down into complaints involving client and operators; between operators, against regulators/self -regulatory organisation (SRO), SRO and regulator; trade manipulation, accounting frauds, Ponzi schemes."
Madubuike explained that the classification is to ensure clarity and simplicity and enhance effectiveness of the initiative.
"The framework will also promote self-regulation by recognised trade groups of operators in the market, ensuring that the groups are structured to handle complaints, which is scrutinised to ensure it is fair and firm and in line with the approved code of conduct of the group. Such trade groups are required to render periodic report of complaints handled to the self-regulatory organisation (SRO) and regulator for information and necessary action," he added.
The ASHON chairman noted that it was expected that recommendations and sanctions arising from handling complaints will have the backing of the SRO and apex regulator that are legally empowered to do so.
"The new structure will place initial emphasis on clients complaints against operators especially stockbroking firms and registrars. This is borne out of the higher percentage of these complaints to other classifications as well as the potential positive effect it will have on investor confidence when these are streamlined," he said.
Investment and Securities Tribunal Link
Madubuike added that the framework will be made in such a way that an unsatisfied client can move to the next level, where the complaint would have been copied by the complainant to act as a check, while ensuring prompt attention to all complaints.
Such expected next level is the Investment and Securities Tribunal (IST).
However, the IST, which is a specialised court meant to resolve capital market cases, appears to have turned to the regular courts, where cases suffer unnecessary delay for up to three years or more, arising from frivolous injunctions, and other delay tactics often employed by defense counsel.
In the opinion of Mr. Sola Ephraim-Oluwanuga, a lawyer and until some years ago, a judge of the IST, the tribunal needs some reforms for it to achieve the objectives of setting it up.
Reforming the IST
In first place, Ephraim-Oluwanuga, also a former Chairman of Ibadan Zonal Shareholders Association, said the tribunal has to "simplify its processes to make for expeditious hearing."
According to him, challenges facing the IST include inadequate funding, lack of adequate and skilled practitioners in capital market related matters.
He also pointed out the jurisdictional competition between the Federal High Courts, High Courts and the tribunal due to constitutional constraints.
He therefore advocated that as a first step, the 1999 constitution amended to make the IST a court of record and included in the hierarchy of courts, unlike the current situation where rulings of the court are taken to the Federal High Court for documentation.
He added that there is need for the Court of Appeal to treat capital market appeals with speed and dispatch like criminal cases to boost investor confidence, just as the National Assembly should vest the tribunal with powers to enforce its judgments and create an enforcement unit in the IST.
Ephraim-Oluwanuga added that SEC and the tribunal should also remove administrative bottlenecks to delays in appeals at the tribunal, and commencement of hearing respectively.
Speaking in the same, the President, Capital Market Solicitors Association, Dr. Babatunde Ajibade, who is a Senior Advocate of Nigeria (SAN), emphasised on the need for quick dispensation of justice in capital market related disputes, owing to its peculiar time-sensitive nature and the consequent substantial risk of loss.
He therefore, commended the decision to overhaul the complaints management mechanism, saying it would it would address investor complaints that would otherwise come to the SEC.
However, he wants the commission to look into a more holistic approach that deals with the enforcement of capital market rules and regulations from A - Z, to give confidence to both local and foreign investors.
"Reforms of this sort should be structural and should involve the leadership of the judiciary," he advised.
The CMF is already being exposed to the capital market community and is expected to be adopted after the harmonisation of all the differences.